<PAGE>1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-6715
ANALOGIC CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2454372
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8 Centennial Drive, Peabody, Massachusetts 01960
(Address of principal executive offices) (Zip Code)
(978) 977-3000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
The number of shares of Common Stock outstanding at October 31, 1998 was
12,662,655.
<PAGE>2
ANALOGIC CORPORATION AND SUBSIDIARIES
INDEX
Page
No.
Part I Financial Information
Consolidated Condensed Balance Sheets
October 31, 1998 and July 31, 1998 3
Consolidated Condensed Statements of Income
Three Months Ended October 31, 1998 and 1997 4
Consolidated Condensed Statements of Cash Flows
Three Months Ended October 31, 1998 and 1997 5
Notes to Consolidated Condensed Financial Statements 6 - 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 9
Part II Other Information 10 - 11
Index to Exhibits
<PAGE>3
PART I FINANCIAL INFORMATION
ANALOGIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(000 omitted)
<TABLE>
<CAPTION>
October 31, July 31,*
1998 1998
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 26,637 $ 27,644
Marketable securities, at market 97,111 94,156
Accounts and notes receivable, net 54,176 54,393
Inventories 55,004 54,916
Prepaid expenses and other current assets 6,377 6,305
Total current assets 239,305 237,414
Property, plant and equipment, net 56,156 54,577
Investments in and advances to affiliated
companies 5,797 6,372
Other assets, including unamortized software
costs (1999, $3,612; 1998, $3,689) 4,741 4,594
$305,999 $302,957
</TABLE>
<PAGE>4
PART I FINANCIAL INFORMATION
ANALOGIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(000 omitted)
<TABLE>
<CAPTION>
October 31, July 31,*
1998 1998
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Mortgage and other notes payable $ 352 $ 2,950
Obligations under capital leases 578 560
Accounts payable, trade 11,650 11,617
Accrued employee compensation and benefits 10,162 12,441
Accrued expenses 6,045 7,808
Accrued income taxes 3,937 1,320
Accrued dividends payable 759
Total current liabilities 33,483 36,696
Long-term debt:
Mortgage and other notes payable 5,782 5,983
Obligations under capital leases 1,570 1,721
Deferred income taxes 3,183 3,144
Minority interest in subsidiary 3,931 3,828
Excess of acquired net assets over cost, net
of accumulated amortization 302 330
Stockholders' equity:
Common stock, $.05 par 693 693
Capital in excess of par value 23,873 23,567
Retained earnings 245,327 241,329
Unrealized holding gains and losses 2,558 1,656
Cumulative translation adjustments (60) (1,373)
Treasury stock, at cost (13,430) (13,515)
Unearned compensation (1,213) (1,102)
Total stockholders' equity 257,748 251,255
$305,999 $302,957
</TABLE>
* See note 2 of notes to consolidated condensed financial statements for
further information.
The accompanying notes are an integral part of these financial statements.
<PAGE>5
ANALOGIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(000 omitted, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
1998 1997
<S> <C> <C>
Revenues:
Product and service, net $57,839 $54,523
Engineering and licensing 3,588 4,163
Other operating revenue 3,620 3,735
Interest and dividend income 2,119 1,508
Total revenues 67,166 63,929
Costs of sales and expenses:
Cost of sales:
Product and service 33,900 31,901
Engineering and licensing 3,021 4,364
Other operating expenses 1,635 1,725
General and administrative 5,059 4,906
Selling 6,267 5,995
Research and product development 8,993 7,748
Interest expense 115 108
(Gain) Loss on foreign exchange 84 (68)
Amortization of excess of acquired
net assets over cost (28) (161)
Amortization of excess of cost
over acquired net assets 21
Total cost of sales and expenses 59,046 56,539
Income from operations 8,120 7,390
Gain on sale of marketable securities 997
Equity in loss of unconsolidated affiliates (1,088) (974)
Impairment on investment (400)
Income before income taxes and minority
interest 7,032 7,013
Provision for income taxes 2,180 2,370
Minority interest in net income of
consolidated subsidiary 95 9
Net income $ 4,757 $ 4,634
Earnings per common share:
Basic $0.38 $0.37
Diluted 0.37 0.36
Dividends declared per common share $0.06 $0.05
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>6
ANALOGIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000 omitted)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,757 $ 4,634
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,600 2,265
Amortization of capitalized software 509 606
Amortization of excess of cost over
acquired net assets 21
Amortization of excess of acquired net
assets over cost (28) (161)
Minority interest in net income of
consolidated subsidiaries 95 9
Compensation from stock grants 146 156
Gain on sale of equipment (19) (1)
Gain of sale of marketable securities (997)
Excess of equity in losses of
unconsolidated affiliates 1,088 974
Impairment on investment 400
Changes in operating assets and liabilities
Decrease (increase) in assets:
Accounts and notes receivable 217 4,060
Inventories (88) (4,308)
Prepaid expenses and other current assets (108) (603)
Other assets (137) (18)
Increase (decrease) in liabilities:
Accounts payable, trade 33 842
Accrued expenses and other current liabilities (4,006) (3,415)
Accrued and deferred income taxes 2,692 236
Accrued dividends payable 759 630
TOTAL ADJUSTMENTS 3,753 696
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,510 5,330
</TABLE>
<PAGE>7
ANALOGIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000 omitted)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
1998 1997
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in and advances to affiliated companies (600)
Additions to property, plant and equipment (4,195) (3,046)
Capitalized software (432) (386)
Purchases of marketable securities (2,988) (10,631)
Maturities of marketable securities 935 5,555
Proceeds from sale of property, plant and equipment 35 1
Proceeds from sales of marketable securities 997
NET CASH USED BY INVESTING ACTIVITIES (7,245) (7,510)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on debt and capital lease obligations (2,932) (317)
Issuance (cancellation) of common stock pursuant
to stock options and employee stock purchase plan 106 (11)
Dividends declared to shareholders (759) (630)
NET CASH USED BY FINANCING ACTIVITIES (3,585) (958)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,313 752
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (1,007) (2,386)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 27,644 24,954
CASH AND CASH EQUIVALENTS, END OF PERIOD $26,637 $22,568
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>8
ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting solely
of normal recurring adjustments) necessary to fairly present Analogic
Corporation's financial position as of October 31, 1998 and July 31,
1998, the results of its operations for the three months ended October
31, 1998 and 1997 and statements of cash flows for the three months then
ended. The results of the operations for the three months ended October
31, 1998 are not necessarily indicative of the results to be expected for
the fiscal year ending July 31, 1999.
The accounting policies followed by the Company are set forth in Note 1
to the Company's financial statements in its Annual Report on Form 10-K
for the fiscal year ended July 31, 1998.
2. Financial statements, with the exception of the July 31, 1998 balance
sheet, are unaudited and have not been examined by independent certified
public accountants. The consolidated balance sheet as of July 31, 1998
contains data derived from audited financial statements.
The inventories as of October 31, 1998 were not based on a physical or
perpetual inventory but were calculated on the basis of an estimated
percentage of material used during the period. The components of
inventory are estimated as follows:
<TABLE>
<CAPTION>
October 31, July 31,
1998 1998
<S> <C> <C>
Raw materials $24,596,000 $25,226,000
Work-in-process 19,370,000 18,845,000
Finished goods 11,038,000 10,845,000
$55,004,000 $54,916,000
</TABLE>
4. Notes payables decreased by $2,598,000 in the first quarter ended October
31, 1998 primarily due to repayment of borrowing against a line of credit
by Camtronics.
5. Total interest expense, amounted to $150,000 of which $35,000 was
capitalized during the three months ended October 31, 1998. Interest
paid amounted to $115,000 and $108,000 during the three months ended
October 31, 1998 and 1997, respectively.
6. Income taxes paid during the three months ended October 31, 1998 and 1997
amounted to $440,000 and $1,425,000, respectively.
7. The Company declared a dividend of $.06 per common share on October 8,
1998, payable on November 6, 1998 to shareholders of record on October
23, 1998.
8. The Company has adopted SFAS No. 130, "Reporting Comprehensive Income,"
which requires that all components of comprehensive income and total
comprehensive income be reported and that changes be shown in a
financial statement displayed with the same prominence as other
financial statements. The Company has elected to disclose this
information in its Statement of Stockholders' Equity. The following
<PAGE>9
ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
8. (continued)
table presents the calculation of comprehensive income and its
components for the three months ended October 31, 1998 and 1997.
<TABLE>
<CAPTION>
Three Months Ended
October 31,
1998 1997
<S> <C> <C>
Net Income $4,757,000 $4,634,000
Other Comprehensive Income(Loss) Net of Tax:
Unrealized holding gains and losses 622,000 (59,000)
Foreign currency translation adjustment 906,000 498,000
Total Comprehensive Income $6,285,000 $5,073,000
</TABLE>
9. Basic earnings per common share was calculated by dividing net income by
the weighted average number of common shares outstanding during the
period. Diluted earnings per share was calculated by dividing net income
by the sum of weighted average number of common shares outstanding plus
all additional common shares that would have been outstanding if
potentially dilutive common shares had been issued. The following table
indicates the number of shares utilized in the earnings per share
calculations for the three months ending October 31, 1998 and 1997,
respectively.
<TABLE>
<CAPTION>
Three Months Ended
October 31,
1998 1997
<S> <C> <C>
Net Income $4,757,000 $4,634,000
Common Shares outstanding-basic 12,654,106 12,598,468
Effect of dilutive securities:
Stock Options 122,943 177,244
Common Shares outstanding-diluted 12,777,049 12,775,712
Earnings per Common Share:
Basic $ 0.38 $ 0.37
Diluted $ 0.37 $ 0.36
</TABLE>
<PAGE>10
ANALOGIC CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company's balance sheet reflects a current ratio of 7.1 to 1 at October 31,
1998 compared to 6.5 to 1 at July 31, 1998. Cash, cash equivalents and
marketable securities, along with accounts and notes receivable, constitute
approximately 74% of current assets at October 31, 1998. Liquidity is
sustained principally through funds provided from operations, with short-term
time deposits and marketable securities available to provide additional sources
of cash. The Company places its cash investments in high credit quality
financial instruments and, by policy, limits the amount of credit exposure to
any one financial institution. Management does not anticipate any difficulties
in financing operations at anticipated levels. The Company's debt to equity
ratio was 0.19 to 1 at October 31, 1998 compared to 0.21 to 1 at July 31, 1998.
Capital expenditures totaled approximately $4,195,000 during the three months
ended October 31, 1998.
RESULTS OF OPERATIONS
Three Months Fiscal 1999 (10/31/98) vs. Three Months Fiscal 1998 (10/31/97)
Product, service, engineering and licensing revenues for the three months ended
October 31, 1998 were $61,427,000 as compared to $58,686,000 for the same
period last year. The increase of $2,741,000 was due to an increase in sales
of Medical Technology Products of $4,937,000 (primarily due to sales of the new
Computed Tomography (CT) Scanner and Digital Ultrasound subsystems), partially
offset by a decrease in Signal Processing Technology Products of $1,663,000 and
a decrease in Industrial Technology Products of $533,000. Other operating
revenue of $3,620,000 and $3,735,000 represents revenue from the Hotel
operation for the three months ending October 31, 1998 and 1997, respectively.
Interest and dividend income increased $611,000, primarily due to interest
earned from the City of Peabody on real estate tax abatement.
The percentage of total cost of sales to total net sales for the three months
of fiscal 1999 and fiscal 1998 were 60% and 62%, respectively. The decrease
was primarily due to the engineering portion of cost of sales reflecting lower
costs on engineering projects than the same period the previous year and a
benefit of real estate tax abatement of approximately $575,000. Operating
costs associated with the Hotel during the first three months of fiscal 1999
and 1998 were $1,635,000 and $1,725,000, respectively.
General and administrative and selling expenses increased $425,000, primarily
due to increased staffing, partially offset by a real estate tax abatement of
approximately $170,000. Research and product development expenses increased
$1,245,000 primarily due to the Company's expanding engineering efforts
applicable to developing complex imaging systems, and partially offset by a
benefit of real estate tax abatement of approximately $300,000.
Computer software costs of $432,000 and $386,000 were capitalized in the first
three months of fiscal 1999 and 1998, respectively. Amortization of
capitalized software amounted to $508,000 and $605,000 in the first three
months of fiscal 1999 and 1998, respectively.
<PAGE>11
ANALOGIC CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Fiscal 1999 (10/31/98) vs. Three Months Fiscal 1998 (10/31/97)
(continued)
The Company's share of losses of a privately held company amounted to $995,000
and $538,000 during the first quarter of fiscal 1999 and 1998, respectively.
During the first quarter of fiscal 1999, the Company's investment in Analogic
Scientific was decreased by $180,000, and by $575,000 in the first quarter of
fiscal 1998, reflecting the Company's share of Analogic Scientific's equity.
During the first quarter of fiscal 1998, the Company sold 140,560 common shares
of a publicly traded company, resulting in a gain of $997,000.
During the first quarter of 1998, the Company recorded a reserve of $400,000
reflecting a partial impairment of its 19% investment in another privately held
company.
The effective tax rate for the first quarter of fiscal 1999 is 31% versus 34%,
this decrease is primarily due to no tax benefit applicable to equity in losses
of a privately held company in fiscal 1998.
Net income for the three months ended October 31, 1998 was $4,757,000 or $.37
per diluted share as compared with $4,634,000 or $.36 per share for the same
period last year.
Year 2000
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. Computer programs
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. If the Company's internal systems do not
correctly recognize date information when the year changes to 2000, there could
be an adverse impact on the Company's operations.
The Company has undertaken considerable effort to assess the actions and
resources that will be required to make its systems Year 2000 compliant. The
Company, utilizing both internal and external resources to upgrade its computer
hardware and software systems, commenced implementation and now is configuring
and testing the Year 2000 software to meet its business needs. The Company has
also identified and is in the process of implementing changes to other
equipment in order to make them Year 2000 compliant.
The Company is also assessing the possible effects of Year 2000 issues on its
significant vendors and customers, which could in turn affect the Company's
operations. The Company has not yet been able to determine, however, whether
any of its suppliers or service providers will need to make any such software
modifications or replacements or whether the failure to make such software
corrections will have an adverse effect on the Company's operations or
financial condition.
The Company currently estimates that Year 2000 costs for this current fiscal
year and next will range from $4.0 million to $6.0 million. The estimated costs
are based on management's best projections, yet there can be no guarantee that
those forecasts will be achieved and actual results could differ materially
from those anticipated. The cost of the project will be funded through
operating cash flows.
<PAGE>12
ANALOGIC CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) During the quarter ended October 31, 1998, the Company did not file any
reports on Form 8-K.
<PAGE>13
ANALOGIC CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANALOGIC CORPORATION
Registrant
Date December 2, 1998 /s/ Bernard M. Gordon
Bernard M. Gordon
Chairman of the Board
Chief Executive Officer
Date December 2, 1998 /s/ John A. Tarello
John A. Tarello
Senior Vice President
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME AND IS
QUALIFIED IN ITS ENTIRETY TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> OCT-31-1998
<EXCHANGE-RATE> 1
<CASH> 26637
<SECURITIES> 97111
<RECEIVABLES> 56624
<ALLOWANCES> 2448
<INVENTORY> 55004
<CURRENT-ASSETS> 239305
<PP&E> 153942
<DEPRECIATION> 97786
<TOTAL-ASSETS> 305999
<CURRENT-LIABILITIES> 33483
<BONDS> 0
0
0
<COMMON> 693
<OTHER-SE> 257055
<TOTAL-LIABILITY-AND-EQUITY> 305999
<SALES> 61427
<TOTAL-REVENUES> 67166
<CGS> 36921
<TOTAL-COSTS> 38556
<OTHER-EXPENSES> 20375
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 115
<INCOME-PRETAX> 7032
<INCOME-TAX> 2180
<INCOME-CONTINUING> 4757
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4757
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.37
</TABLE>
